Bitcoin Already Consumed More Energy Than Switzerland: Why Its Validity As A Payment System Is Debatable

The University of Cambridge has developed an online tool that can be consulted in real time an estimate of global annual energy consumption that involves bitcoin mining.

According to this tool, bitcoin now consumes 64.15 TWh a year, a figure higher than that of countries like Switzerland. The debate about its validity is reopened, and of course it does not seem that it can become a means of payment in the short term due precisely to the high energy cost of each transaction.

A brutal consumption (or maybe not so much)

The so-called Cambridge Bitcoin Electricity Consumption Index or CBECI tries to estimate the amount of energy needed for the entire bitcoin infrastructure to continue to operate (mining included).

The calculation comes in time, both because of the boom of bitcoin in recent weeks and news as it was recently: the consumption of energy in Iran has soared 7% due to bitcoin mining. The country subsidizes electricity consumption to its citizens, which makes the electricity bill there – as in other countries – is especially attractive for those who perform this activity.

The index is actually a very open estimate: although it gives this figure of 64.15 TW per year, it also establishes a minimum figure (22 TWh) and a maximum (150 TWh) that show how difficult it is to make an accurate approximation to consumption real that this cryptocurrency imposes.

In fact and as our colleagues in Magnet point out, the estimation of this consumption is very difficult to do: each miner or group of miners uses hardware of different types and especially diverse sources of energy among which are the renewable ones.

No quotas of each source are known in this sense, so it is very difficult to adjust the accuracy. Already in the past Digiconomist raised its own criteria when estimating that consumption, which is established at 70 TWh per year.

The consumption of all iPads that exist in the market, for example, could rise according to the Electric Power Research study to 1.53 TWh a year, a figure clearly lower than bitcoin but that allows to establish a good reference.

Environmental problems, problems to convert it into a payment method

The interest in bitcoin as a store of value and as an excuse to speculate is obvious: the market has been seeing for years how the value of bitcoin goes through a true roller coaster. That generates interest, and the interest results in that fever due to mining that intensifies and reduces according to the value of bitcoin.

This has a direct effect on the global energy consumption of bitcoin the consequence of this consumption is the environmental impact.

The potential environmental problem is added another: bitcoin has become difficult to become a payment method because transactions are very expensive. How much? Digiconomist’s study of August 2018 made this clear: a bitcoin transaction consumes as much energy as 100,000 transactions with VISA.

There are other well-known barriers to this hypothetical use of bitcon as a bargaining chip – the number of transactions per second, above all – but what is clear is that these consumptions are a clear impediment to getting bitcoin to become something more than what is now. That does not seem to matter much, because the interest in bitcoin (both its fans and its detractors) does not stop growing.